Operating Budget

The 2016 Operating Budget is submitted in accordance with Article VI, Section 6.02, Paragraph (A)(6) of the Fairfield City Charter. The proposed budget represents this coming year’s plan for generating revenues and funding expenditures to implement specific programs, functions and activities during the 2016 fiscal year. The budget is the City’s primary fiscal planning document. Its major goal is to provide sound fiscal administration. Prudent financial management seeks to meet the needs of the City’s residents and businesses while recognizing the constraints of available revenues. Thoughtful expenditure priorities and maintenance of reasonable staffing levels are key to sound budgeting. The proposed Operating Budget was drafted with this in mind. The following highlights are provided:

Revenues – Revenues for the proposed budget, including inter-fund transfers, are projected at $73,796,240. Estimated revenue from 2016 as compared to 2015 is estimated to have increased approximately 1% (all sources). The additional income tax revenue paid to the General Fund has, as its primary intended purpose, bolstered the reserves to meet the City’s bond rating agency’s (Moody’s Investor Services) requirements. The estimated revenue allocation is shown in the chart below.

The largest source of revenue, the 1.5% Income Tax, is projected to generate $26,550,000 for 2016. Revenues are being projected based on 2015 actual collections from this revenue source. The income tax revenues will be allocated as follows for 2016:

General Fund (1.2%) $ 21,240,000

Street Improvement Fund (.15%) $ 2,655,000

Capital Improvement Fund (.15%) $ 2,655,000

Total $ 26,550,000

Expenditures – Overall 2016 expenditures from all uses total $72,570,412. The increase of 2.8% from the 2015 original budget is primarily a result of increases in health care costs and negotiated union contracts. Historically the City has spent an average of 95% of its budgeted operating funds which, in the past, has allowed for the remaining 5% of unspent funds to be added back to next year’s respective fund balances. With tighter up-front expenditures being budgeted this year, and in 2015, it is unlikely that the same level of balances will be added back to the respective funds at the end of 2016. Note that relatively fixed costs such as wages, along with related expenses such as taxes and pension contributions, comprise 53.4%, or approximately $38,750,000, of the City’s total operating budget.

The top five of the City’s funds are depicted below. The graph compares the 2015 and 2016 expenditure budgets (absent transfers). Each fund compared to last year is showing an increase: General fund – 2.5% ($26,046,778), Street funds – 9.9% ($4,567,326), Fire Levy fund – 2.6% ($5,871,762), Water/Sewer funds – 3.0% ($9,911,341) and the Recreational Facilities fund – (9.85%) ($1,531,238). The increases are largely due to increases in health care costs and negotiated union contracts; whereas, the decrease is due to aligning expenditures with projected revenues.

2016 Expenditures by Major Funds:

Grants to outside agencies from the general fund have been budgeted at the same level in 2016, at $36,000. Grant requests were submitted from Partners in Prime, Fairfield Community Foundation, Fairfield Summer Community Theater, the Hamilton-Fairfield Symphony Orchestra, Fairfield Youth Athletic Association, Fairfield Food Pantry, Fairfield Civitan Club and the Butler County Regional Transit Authority. Presentations from the grant requestors were heard during the Budget Hearing on November 9, 2015. The specific allocation of available grant funds will be discussed during the Budget Hearings on November 23 and/or December 7, 2015.

General Fund transfers to other funds, including the Street, Construction and Maintenance fund, Municipal Garage fund, Recreational Facilities fund and Fire Levy fund total $2,030,000 for 2016. Particular to the Fire Levy fund, the current EMS billing and property tax revenues have leveled off and are not sufficient to support fire operations; therefore, a future discussion on a renewal fire levy should be considered.

Debt Service – The City’s Debt Service Funds are dependent on revenues from the General Fund, Capital Funds, and the Water, Sewer and Recreation Facilities Funds. Due to the City’s commitment to have the debt service funds have first rights on City revenues, as well as our intent to manage the debt effectively, the City’s bond rating received a confirmation of its investment grade rating of “Aa1” in April, 2015. The City’s current net outstanding debt for the 2016 Operating Budget will be $20,993,837. The total debt payments in 2016 will be $848,416 for interest and $3,653,527 for principal.

Fund Balance – The General Fund balance has been the subject of much discussion over the past several years as State local government and estate taxes have decreased or been eliminated. The General Fund’s main source of revenue, the local income tax, has now stabilized and is being conservatively projected to increase over 2015 revenues by 2.9%. The 2012 public vote on the income tax re-apportionment helped to offset State influenced revenue losses, as well as to bolster the General Fund balance, the latter of which is expected to be approximately $11.2 million at the end of 2015. Of this amount, $7.1 million of the General Fund balance is being budgeted as a reserved fund balance; in conjunction with Council’s goals. This leaves an unreserved cash balance of $4.1 million to continue to provide services to residents as well as to offset future unforeseen national, regional and/or local economic changes, in the event of negative occurrences. A historical perspective chart will be provided at Council’s November 23 budget presentation.

The 2016 Operating Budget demonstrates the overall financial strength of the City of Fairfield’s financial position, especially in the General Fund. This strength is attributable to the vibrant and diverse economic base that continues to be Fairfield’s hallmark, along with the City’s consistent stewardship of managing expenditures, particularly during challenging economic times.

Summary – The Annual Operating Budget is a comprehensive road map used to guide the operations of the City. Fairfield has provided an excellent and comprehensive level of service to its residents and businesses within the constraints of available financial resources. This document is a plan to continue those existing service levels, while simultaneously maintaining the City’s strong financial position in a long term, sustainable manner.